call option

An option that gives the purchaser the right, but not the obligation, to purchase the underlying stock, commodity, or other financial instrument at a set time and price from the writer of the call option. Typically, one option contract for a stock confers the right to buy 100 shares of the stock. A purchaser of a call option believes that the price of the underlying security will rise and is willing to pay a premium for the right to be able to purchase it at a lower price in the future, thereby avoiding the inflated market price.